Legal embers flare after St. Joseph fire lawsuit targeted Kemper Arena developer

A lawsuit over a burned-out building in St. Joseph has inflicted “reputational harm” to Kansas City-based Foutch Brothers LLC, says a claim by the developer behind Kemper Arena’s amateur-sports makeover.

In a federal court filing Tuesday, Foutch Brothers claimed the damage to its reputation was intentional and part of an insurance company’s efforts to “coerce” acceptance of a low-ball insurance payout on the historic brick structure.

Philadelphia Indemnity Insurance Co. had sued Foutch Brothers and some related businesses last month. It accused them of “fraudulent misrepresentation” in seeking nearly a $13 million claim against the building that it said was worth only $150,000.

The insurer claimed Foutch Brothers “intentionally concealed and misrepresented material facts” when it insured the building and when it filed its claim after the fire.

Foutch Brothers denied those accusations and added its own counterclaims against Philadelphia Indemnity with its filing. Neither company would comment on the filings.

The counterclaim said Philadelphia Indemnity’s actions caused “foreseeable actual and consequential damages” to Foutch Brothers. It did not detail or quantify the damages, nor would Foutch Brothers provide an update on the status of the Kemper Arena project.

Kansas City sold Kemper Arena to Foutch Brothers for $1 earlier this year. The sale allowed Foutch Brothers to seek historic tax credits and other financing for its $39 million plan to turn the arena into an amateur sports complex.

At the center of the courtroom battle is the value of the St. Joseph building, which was destroyed last fall by a rapidly spreading fire. Foutch Brothers said in its filing that it sought the nearly $13 million payout of the building’s actual cash value but that Philadelphia Indemnity offered no more than $540,000.

The insurance company had set that value even before seeking an independent assessment of the building’s actual cash value, the counterclaim said. It said each side got separate assessments and both came in at more than $12.5 million.

Even then, Philadelphia Indemnity offered only $2.15 million to settle the insurance claim, the Foutch Brothers filing said.

It also described a Sept. 20 meeting among Steve Foutch, principal of the Kansas City company, and three Philadelphia Indemnity officials. At one point, chief claims officer William J. Benecke asked his junior officers to leave the room. They “didn’t need to hear” what was coming next, the recent court filing said.

“Mr. Benecke asserted that Philadelphia (Indemnity) had previously denied a different claim based on allegedly fraudulent representations made by a property manager formerly used by” Foutch Brothers, the filing said.

That involved a different insurance policyholder — not Foutch Brothers or its co-defendants — a different building, a different policy and a different application, Foutch Brothers claimed in the filing. Benecke also offered a $6 million settlement.

“Mr. Foutch took Mr. Benecke’s statements before and after making the $6,000,000 offer, to constitute an implied threat that, if Mr. Foutch did not accept the offer that very day, Philadelphia may assert a baseless fraud claim” against Foutch Brothers, the filing said.

This story was originally published November 1, 2017 at 4:41 PM with the headline "Legal embers flare after St. Joseph fire lawsuit targeted Kemper Arena developer."